SVB's former owner sues US banking watchdog to recover $1.9bn

investmentweek.co.uk:

The cash balance, which is held in an account at its banking subsidiary, has been described as “the most significant asset” of the SVB Financial estate, the group said.

SVB Financial Group filed a voluntary petition for Chapter 11 bankruptcy in New York on 17 March. In a filing in a bankruptcy court on Sunday (9 July), the group said retention of the cash by the FDIC violated US bankruptcy law, according to the FT. 

The cash balance, which is held in an account at its banking subsidiary, was described by the group as «the most significant asset» of the SVB Financial estate.

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SVB Financial said the lack of access to the funds was affecting its reorganisation, as the money should be generating more than $100m in annual interest. Without that, it might need to look for a «costly and uncertain» external financing, it said. 

Ownership of the $1.9bn has been an issue of dispute between SVB Financial Group and the FDIC since Silicon Valley Bank's assets were seized following a deposit flight in March, which caused the biggest US banking collapse since 2008. 

According to the complaint, the FDIC induced SVB Financial to keep its cash at the collapsed bank, only to later seize it. It added that the regulator guaranteed all deposits to prevent a run on the bank, but later took SVB Financial's own funds from that guarantee. 

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The FDIC previously said that Silicon Valley Bank's failure drained its insurance fund by $16bn and it is legally able to hold the seized funds while it determines SVB Financial's share of the rescue costs.

According to SVB Financial, although the FDIC has said it has claims against the